If you’d been on a deserted island for the past year – and hadn’t heard terms like “housing bubble,” “credit crunch” and “Wall Street meltdown” – you might have thought all was well with the real estate market at the Conrad building’s open house two weekends ago.
Dozens of potential buyers wandered through the still-unfinished condo development on a crisp Sunday afternoon and marveled at model units while munching on shrimp skewers from Dean & Deluca. Waiters floated around, holding trays covered with drinks.
But perhaps the oddest thing of all was not the fact that there were so many visitors – or that on its first day on the market, the 35-unit Conrad got eight offers. It was where this event was happening: 110th Street and First Avenue in East Harlem.
“The price seems to be right,” observed Vahid Pourkay, who was looking for an investment property and had come to the Conrad from New Jersey with his wife and two children.
Prices run as low as $609 per square foot – and up to $776 per square foot – something practically unheard of in Manhattan for new construction.
“I think there’s a future here as an investment,” Pourkay told us.
Pourkay wasn’t the only potential investor.
“I see it as possibly both [an investment and a primary residence],” said open house visitor Eric O’Shea. “I can see a roommate and myself living here.”
Current Upper East Side renter Karim Lopez, who had come to the open house with her husband and daughter, was on the lookout for a two-bedroom: “We’ve been looking in Brooklyn – we went to [new buildings that included] Toren and Oro and Isabella – but the prices are really very high.”
In East Harlem, prices are much more reasonable, which might help explain why the area isn’t in free fall.
Many real estate experts long believed that the neighborhoods most harmed by any housing bubble would be the ones that weren’t quite established yet – like Harlem, with too much development and not enough buyers.
And while it’s true that Harlem sales figures in 2008 have generally been about the same (and in some instances better) than in 2007, those figures have not kept apace with the amount of new inventory.
But it seems as if East Harlem specifically might have dodged a bullet. After one week on the market, there were 10 contracts out for the Conrad, according to broker Valerie Dominguez of the Corcoran Group, who adds that all the contracts were at the asking price, with “no negotiating of any price [or] closing costs.”
And it’s not just a residential boom. The neighborhood is getting the East River Plaza, a 500,000-square-foot shopping complex slated to be finished in August 2009, with plans for a Marshalls, Target, Best Buy and possibly Home Depot.
There’s also a $700 million entertainment and housing complex in the works from East 125th Street to East 127th Street, from Second Avenue to Third Avenue. In addition to retail space, a hotel and a cultural center, there are plans for 600 low- and middle-income apartments and 200 market-rate units.
One reason for East Harlem’s relative success is that many condo developers there have kept their expectations realistic. The 90-unit 119&Third began sales last month with studios starting at $375,000.
“Most places [around the city] are over $1,000 per square foot,” says David Apelewicz, a sales associate for 119&Third. “Ours are $600 and change.”
If you look at the eight units that got offers the first weekend at the Conrad, the average price per square foot was $685 – less than the averages for last year’s new East Harlem buildings, like the Sloane ($700) or Aura ($730).
Moreover, many buildings are open to cutting a deal.
“We’re willing to negotiate with clients – we have already negotiated a little,” says Jose Nunez, sales associate for the Mirada, a recently opened 68-unit building. “The biggest thing now is: Can we find clients who can get approved for a mortgage?”
East Harlem buyers, says Dominguez, are not necessarily looking for the apartment where they’ll raise a family. They’re looking for their first purchase, and the developers of buildings like the Conrad, which is mostly one- and two-bedroom units, seem to understand this.
“East Harlem is the only place in Manhattan where you can get [a one-bedroom] for $450,000, with the amenities you want and where the common charges and taxes are really low,” says Dominguez.
“What happened in [central and west] Harlem is that you have [developers] building really large apartments,” she notes. Which means there might be a glut of bigger apartments uptown.
“It’s the larger ones – the penthouses – that are still on the market,” says Aroza Sanjana, a broker who is selling the Mirada, where some of the available 1,000-square-foot two-bedroom, two-bath units are more than $700,000. One 1,167-square-foot penthouse is $849,900.
And despite East Harlem’s relative resilience, many developers have prepared themselves for the worst.
“The tightening of credit would definitely have an adverse effect,” says Albert Marengo, the chief financial officer for Garry H. Silver Architects, which developed Observatory Place on 103rd Street and First Avenue and currently has three other East Harlem buildings in the works.
“We are hopeful that the credit crunch eases within the next 60 to 90 days,” he says. “As soon as the mood of the buyers becomes more relaxed and people know they’re going to have their job next week, or next year, it will get better. But we have to be realistic. God forbid that doesn’t happen. We knew that we’d better have another plan in place – and the only plan that makes sense is a rental.”
That’s basically what happened when the firm was designing a building on East 120th Street as six floor-through units – it tweaked plans after the credit market started tightening.
“We couldn’t rent them for the amount of money to make the construction loan” should the units not sell, says Marengo. “So we made it nine units.”
And those nine units, depending on how the market shakes out, could all end up being rentals.
Meanwhile, the developer of the Bridges, a pair of buildings at Third Avenue and 124th Street, decided to keep one building condo and turn the other into a rental.
But all these issues seemed almost beside the point last Sunday.
“We’re happy about buying now,” Harlem resident Megan Murray, who was at the Conrad with her boyfriend, Julio Franco, told us at the open house. “We’re in a good position – we don’t have to sell.”
“We’re getting a higher rate on a mortgage,” noted Franco, “but we figure we can renegotiate.”
“We got pre-approved,” added Murray. “That took a lot of the stress away.